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THIRD DIVISION
MARICALUM MINING CORPORATION,
Petitioner,
G.R. No. 221813
Present:
AUG 1 5 2018
- versus - VELASCO, JR., J., Chairperson, BERSAMIN,
ELY G. FLORENTINO, GLENN BUENVIAJE, RUDY J. GOMEZ, represented
by his heir THELMA GOMEZ, ALEJANDRO H. SITCHON, NENET ARITA,
FERNANDO SIGUAN, DENNIS ABELIDA, NOEL S. ACCOLADOR,WILFREDO
TAGANILE, SR., MARTIR S. AGSOY, SR., MELCHOR APUCA Y, DOMINGO LA
VIDA, JESUS MOSQUEDA, RUELITO A. VILLARMIA, SOFRONIO M. A YON,
EFREN T. GENISE, ALQUIN A. FRANCO, PABLO L. ALEMAN, PEPITO G.
HEPRIANA, ELIAS S. TRESPECES, EDGAR SOBRINO,
Respondents,
x -- -- -- -- -- -- -- -- -- -- -- -- -- x
ELY FLORENTINO, GLENN BUENVIAJE, RUDY J. GOMEZ, represented by
his heir THELMA GOMEZ, FERNANDO SIGUAN, DENNIS ABELIDA, NOEL S.
ACCOLADOR,WILFREDO TAGANILE, SR., MARTIR S. AGSOY, SR., MELCHOR
APUCA Y, DOMINGO LA VIDA, JESUS MOSQUEDA, RUELITO
LEONEN, MARTIRES, and GESMUNDO, JJ
G.R. No. 222723
11
-
DECISION 2
A. VILLARMIA, SOFRONIO M. A YON, EFREN T. GENISE, ALQUIN A.
FRANCO, PABLO L. ALEMAN, PEPITO G. HEPRIANA, ELIAS S. TRESPECES,
EDGAR SOBRINO, ALEJANDRO H. SITCHON, NENET ARITA, WELILMO T. NERI,
ERLINDA FERNANDEZ, and EDGARDO PENAFLORIDA,
Petitioners,
- versus -
NATIONAL LABOR RELATIONS COMMISSION - 7th DIVISION, CEBU CITY,
"G" HOLDINGS, INC., and TEODORO G. BERNARDINO, ROLANDO DEGOJAS,
MARICALUM MINING CORPORATION.
Respondents.
Promulgated:
G.R. Nos. 221813 & 222723
)( -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- __ ,
__ -- -- --
DECISION
GESMUNDO, J.:
A subsidiary company's separate corporate personality may be
disregarded only when the evidence shows that such separate
personality was being used by its parent or holding corporation to
perpetrate a fraud or evade an existing obligation. Concomitantly,
employees of a corporation have no cause of action for
labor-related claims against another unaffiliated corporation,
which does not exercise control over them.
The subjects of the instant consolidated cases are two (2)
petitions for appeal by certiorari filed by the following
petitioners:
fa/
-
DECISION 3 G.R. Nos. 221813 & 222723
1) Mari cal um Mining Corporation (Marica/um Mining) m G.R. No.
221813; and
2) Ely Florentino, Glenn Buenviaje, Rudy J. Gomez, 1
Fernando Siguan, Dennis Abelida, Noel S. Acollador, Wilfredo C.
Taganile, Sr., Martir S. Agsoy, Sr., Melchor B. Apucay, Domingo
Lavida, Jesus Mosqueda, Ruelito A. Villarmia, Sofronio M. Ayon,
Efren T. Genise, Alquin A. Franco, Pabio L. Aleman, Pepito G.
Hepriana, Elias S. Trespeces, Edgar M. Sobrino, Alejandro H.
Sitchon, Nenet Arita, Dr. Welilmo T. Neri, Erlinda L. Fernandez,
and Edgardo S. Pefiaflorida (complainants) in G.R. No. 222723.
Both of these petitions are assailing the propriety of the
October 29, 2014 Decision2 of the Court of Appeals (CA) in CA-G.R.
SP No. 06835. The CA upheld the November 29, 2011 Decision 3 and
January 31, 2012 Resolution4 of the National Labor Relations
Commission (NLRC) in NLRC Case No. VAC-05-000412-11. In the present
petitions, complainants seek to reinstate the April 20, 2011
Decision 5 of the Labor Arbiter (LA) in consolidated cases NLRC RAB
VI CASE No. 09-10755-10, NLRC RAB VI CASE No. 12-10915-10, NLRC RAB
VI CASE No. 12-10916-10 and NLRC RAB VI CASE No. 12-10917-10, which
granted their joint complaints for monetary claims against G
Holdings, Inc. (G Holdings); while Maricalum Mining seeks to have
the case remanded to the LA for proper computation of its total
monetary liability to the complainants.
The Antecedents
The dispute traces its roots back to when the Philippine
National Bank (PNB, a former government-owned-and-controlled
corporation) and the Development Bank of the Philippines (DBP)
transferred its ownership of Maricalum Mining to the National
Government for disposition or privatization because it had become a
non-performing asset.6
1 Rollo (G.R. No. 222723) p. 12, represented by his heir Thelma
G. Gomez, et al. 2 Id. (G.R. No. 221813, Vol. 1) at 67-80; penned
by Associate Justice Marie Christine Azcarraga-Jacob and concurred
by Associate Justices Ramon Paul L. Hernando and Ma. Luisa C.
Quijano-Padilla. 3 Id. at 381; penned by Presiding Commissioner
Violeta Ortiz-Bantug and concurred by Commissioner Julie C.
Rendoque. 4 Id. at 440. 5 Id. at 250; penned by Labor Arbiter
Romulo P. Sumalinog. 6 See "G" Holdings, Inc. v. National Mines and
Allied Workers Union Local 103 (NAMA WU), et al., 619 Phil. 69, 78
(2009).
)(
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DECISION 4 G.R. Nos. 221813 & 222723
On October 2, 1992, the National Government thru the Asset
Privatization Trust (APT) executed a Purchase and Sale Agreement
(PSA) with G Holdings, a domestic corporation primarily engaged in
the business of owning and holding shares of stock of different
companies. G Holding bought 90% of Maricalum Mining's shares and
financial claims in the form of company notes. In exchange, the PSA
obliged G Holdings to pay APT the amount of P673,161,280.00, with a
down payment of P98,704,000.00 and with the balance divided into
four tranches payable in installment over a period of ten years.7
Concomitantly, G Holdings also assumed Maricalum Mining's
liabilities in the form of company notes. The said financial
liabilities were converted into three (3) Promissory Notes (PNs)
totaling P550,000,000.00(Pl14,715,360.00, Pl86,550,560.00 and
P248,734,080.00), which were secured by mortgages over some of
Maricalum Mining's properties.8 These PNs obliged Maricalum Mining
to pay G Holdings the stipulated amount of P550,000,000.00.
Upon the signing of the PSA and paying the stipulated down
payment, G Holdings immediately took physical possession of
Maricalum Mining's Sipalay Mining Complex, as well as its
facilities, and took full control of the latter's management and
operations.9
On January 26, 1999, the Sipalay General Hospital, Inc. (Sipalay
Hospital) was duly incorporated to provide medical services and
facilities to the general public. 10
Afterwards, some of Maricalum Mining's employees retired and
formed several manpower cooperatives, 11 as follow:
COOPERATIVE DATE OF REGISTRATION San Jose Multi-Purpose
Cooperative (SJMPC) December 8, 1998 Centennial Multi-Purpose
Cooperative (CeMPC) April 5, 1999 Sipalay Integrated Multi-Purpose
Cooperative
April 5, 1999 (SIMPC) Allied Services Multi-Purpose
Cooperative
July 23, 1999 (ASMPC) Cansibit Multi-Purpose Cooperative (CaMPC)
September 16, 1 999
7 See Republic of the Philippines v. "G" Holdings, Inc., 512
Phil. 253, 258 (2005). 8 Supra note 5. 9 Id. 10 Rollo (G.R. No.
222723), pp. 437, 447. 11 Id. (G .R. No. 221813, Vol. II), pp. 553,
557.
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DECISION 5 G.R. Nos. 221813 & 222723
In 2000, each of the said cooperatives executed identical sets
of Memorandum of Agreement 12 with Maricalum Mining wherein they
undertook, among others, to provide the latter with a steady supply
of workers, machinery and equipment for a monthly fee.
On June 1, 2001, Maricalum Mining's Vice President and Resident
Manager Jesus H. Bermejo wrote a Memorandum 13 to the cooperatives
informing them that Maricalum Mining has decided to stop its mining
and milling operations effective July 1, 2001 in order to avert
continuing losses brought about by the low metal prices and high
cost of production.
In July 2001, the properties of Maricalum Mining, which had been
mortgaged to secure the PNs, were extrajudicially foreclosed and
eventually sold to G Holdings as the highest bidder on December 3,
2001. 14
On September 23, 2010, some of Maricalum Mining's workers,
including complainants, and some of Sipalay General Hospital's
employees jointly filed a Complaint 15 with the LA against G
Holdings, its president, and officer-in-charge, and the
cooperatives and its officers for illegal dismissal, underpayment
and nonpayment of salaries, underpayment of overtime pay,
underpayment of premium pay for holiday, nonpayment of separation
pay, underpayment of holiday pay, nonpayment of service incentive
leave pay, nonpayment of vacation and sick leave, nonpayment of
13th month pay, moral and exemplary damages, and attorneys
fees.
On December 2, 2010, complainants and CeMPC Chairman Alejandro
H. Sitchon surprisingly filed his complaint for illegal dismissal
and corresponding monetary claims with the LA against G Holdings,
its officer-in-charge and CeMPC. 16
Thereafter, the complaints were consolidated by the LA.
During the hearings, complainants presented the affidavits of
Alejandro H. Sitchon and Dennis Abelida which attested that, prior
to the formation of the manpower cooperatives, their services were
terminated by Maricalum Mining as part of its retrenchment program.
17 They claimed that, in 1999, they were called by the top
executives of Maricalum Mining and G
12 Id. at 527-552. 13 Id. (G.R. No. 222723) at 112. 14 Supra
note 5. 15 Rollo (G.R. No. 221813, Vol. I), pp. 500-504. 16 Id. at
508-509; rollo (G.R. No. 22 I 8 I 3, Vol. II), pp. 510-5 I I. 17
Id. (G.R. No. 222723) at 171-175. ti
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DECISION 6 G.R. Nos. 221813 & 222723
Holdings and informed that they will have to form a cooperative
for the purpose of providing manpower services in view of the
retrenchment program. Thus, they were "rehired" only after their
respective manpower cooperative services were formed. Moreover,
they also submitted the following documents: (a) Cash Vouchers 18
representing payments to the manpower cooperatives; (b) a Payment
Schedule 19 representing G Holdings' payment of social security
contributions in favor of some Sipalay Hospital employees ( c)
Termination Letters 20 written by representatives of G Holdings,
which were addressed to complainants including those employed by
Sipalay Hospital; and (d) Caretaker Schedules21 prepared by G
Holdings to prove the existence of employment relations.
After the hearings were concluded, complainants presented their
Position Paper22 claiming that: they have not received any increase
in wages since they were allegedly rehired; except for Sipalay
Hospital's employees, they worked as an augmentation force to the
security guards charged with securing Maricalum Mining's assets
which were acquired by G Holdings; Maricalum Mining's assets have
been exposed to pilferage by some of its rank-and-file employees
whose claims for collective bargaining benefits were undergoing
litigation; the Sipalay Hospital is purportedly "among the assets"
of Maricalum Mining acquired by G Holdings; the payrolls for their
wages were supposedly prepared by G Holdings' accounting
department; since the second half of April 2007, they have not been
paid their salary; and some of their services were dismissed
without any due process.
Based on these factual claims, complainants posited that: the
manpower cooperatives were mere alter egos of G Holdings organized
to subvert the "tenurial rights" of the complainants; G Holdings
implemented a retrenchment scheme to dismiss the caretakers it
hired before the foreclosure of Maricalum Mining's assets; and G
Holdings was their employer because it allegedly had the power to
hire, pay wages, control working methods and dismiss them.
Correspondingly, G Holdings filed its Position Paper23
maintaining that: it was Maricalum Mining who entered into an
agreement with the manpower corporations for the employment of
complainants' services for auxiliary or seasonal mining activities;
the manpower cooperatives were the ones who paid the wages,
deducted social security contributions, withheld taxes, provided
medical benefits and had control over the working means
18 Id. at 154-166; 233-245, 251-297, 308-3 14. 19 ld.at 167. 20
Id. at 168-169. 21 Id. at 207-232. 22 Id. at 175-190. 23 Id. (G.R.
No. 221813, Vol. I) at 143-159.
hi
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DECISION 7 G.R. Nos. 221813 & 222723
and methods of complainants; despite Maricalum Mining's decision
to stop its mining and milling operations, complainants still
continued to render their services for the orderly winding down of
the mines' operations; Maricalum Mining should have been impleaded
because it is supposed to be the indispensable party in the present
suit; ( e) Mari cal um Mining, as well as the manpower
cooperatives, each have distinct legal personalities and that their
individual corporate liabilities cannot be imposed upon each other;
and there was no employer-employee relationship between G Holdings
and complainants.
Likewise, the manpower cooperatives jointly filed their Position
Paper24 arguing that: complainants had exhibited a favorable
response when they were properly briefed of the nature and benefits
of working under a cooperative setup; complainants received their
fair share of benefits; complainants were entitled to cast their
respective votes in deciding the affairs of their respective
cooperatives; complainants, as member of the cooperatives, are also
co-owners of the said cooperative and they cannot bargain for
higher labor benefits with other co-owners; and the LA has no
jurisdiction over the case because there is no employer-employee
relationship between a cooperative and its members.
The LA Ruling
In its decision dated April 28, 2011, the LA ruled in favor of
complainants. It held that G Holdings is guilty of labor-only
contracting with the manpower cooperatives thereby making all of
them solidarily and directly liable to complainants. The LA
reasoned that: G Holdings connived with Marcalum Mining in
orchestrating the formation of manpower cooperatives to circumvent
complainants' labor standards rights; it is highly unlikely that
complainants (except Sipalay Hospital's employees) would
spontaneously form manpower cooperatives on their own and in unison
without the guidance of G Holdings and Maricalum Mining; and
complainants effectively became the employees of G Holdings because
their work had changed from assisting in the mining operations to
safeguarding the properties in the Sipalay Mining Complex, which
had already been acquired by G Holding. On the other hand, the LA
denied the claims of complainants Nenet Arita and Domingo Lavida
for lack of factual basis. The fallo of the LA decision reads:
24 Id. at 162-173.
ft/
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DECISION 8 G.R. Nos. 221813 & 222723
WHEREFORE, premises considered, judgment is hereby rendered
DIRECTING respondent "G" HOLDINGS, INC. to pay complainants as
follows:
Un2aid Salaries/ 13111 Month Pay Wages
(I) Salvador Arceo P81,418.08 P6,784.84 (2) Sofronio Ayon
79,158.50 6,596.54 (3) Glenn Buenviaje 105,558.40 8,796.53 (4) Ely
Florentino 102,325.28 8,527.11 (5) Rogelio Fulo 99,352.23 8,279.35
(6) Efren Genise 161,149.18 13,429.10 (7) Rudy Gomez 72,133.41
6,011.12 (8) Jessie Magallanes 239,251.94 19,937.66 (9) Freddie
Masicampo 143,415.85 11,951.32
(10) Edgardo Penaflorida 146,483.60 12,206.97 (11) Noel
Acollador 89,163.46 7,430.29 (12) Gorgonio Baladhay 220,956.10
18,413.01 (13) Jesus Mosqueda 48,303.22 4,025.27 (14) Alquin Franco
180,281.25 15,023.44 (15) Fabio Aleman 30,000.00 2,500.00 (16)
Elias Trespeces 180,000.00 15,000.00 (17) Pepito Hedriana 18,000.00
1,500.00 (18) Dennis Abelida 149,941.00 12,945.08 (19) Melchor
Apucay 371,587.01 30,965.58 (20) Martin Agsoy 128,945.08 10,745.42
(21) Ruelito Villarmia 224,486.95 18,707.25 (22) Fernando Siguan
417,039.32 34,753.28 (23) Alejandro Sitchon 380,423.16 31,701.93
(24) Welilmo Neri 456,502.36 38,041.86 (25) Erlinda Fernandez
125,553.88 10,462.82 (26) Edgardo Sobrino 112,521.40 9,376.78 (27)
Wildredo Taganile 52,386.82 4,365.57 (28) Bartholomew Jamboy
68,000.00 5,666.67
P4,484,3 3 7.48 P373,694.79
and the amount of P485,803.23 as attorney's fees, or the total
amount of FIVE MILLION THREE HUNDRED FORTY-THREE THOUSAND EIGHT
HUNDRED THIRTY-FIVE and 50/100 PESOS (P5,343,835.50).
The other claims are DISMISSED for lack of merit.
Further, the complaints against respondents SIP ALA Y INTEGRATED
MULTI-PURPOSE COOPERATIVE, ALLIED SERVICES MULTI-COOPERATIVE, SAN
JOSE MULTI-PURPOSE COOPERATIVE, CANSIBIT MULTI-PURPOSE COOPERATIVE,
and CENTENNIAL MULTI-PURPOSE COOPERATIVE, being mere agents
ofrespondent "G" HOLDINGS, INC., are hereby DISMISSED.
SO ORDERED.25
25 Id. at 277-278.
#
-
DECISION 9
The pa1iies filed their respective appeals to the NLRC.
G.R. Nos. 221813 & 222723
On July 18, 2011, Mari cal um Mining filed its
Appeal-in-Intervention 26 seeking to: (a) reverse and set aside the
Labor Arbiter's Decision; (b) declare Mari cal um Mining as the
true and proper party-in-interest; ( c) remand the case back to the
Labor Arbiter for proper computation of the money claims of the
complainants; and ( d) give Maricalum Mining the opportunity to
settle with the complainants.
The NLRC Ruling
In its decision dated November 29, 2011, the NLRC modified the
LA ruling. It held that Dr. Welilmo T. Neri, Erlinda L. Fernandez
and Edgar M. Sobrino are not entitled to the monetary awards
because they were not able to establish the fact of their
employment relationship with G Holdings or Maricalum Mining because
Sipalay Hospital has a separate and distinct corporate personality.
As to the remaining complainants, it found that no evidence was
adduced to prove that the salaries/wages and the 13th month pay had
been paid.
However, the NLRC imposed the liability of paying the monetary
awards imposed by the LA against Maricalum Mining, instead of G
Holdings, based on the following observations that: it was
Maricalum Mining-not G Holdings-who entered into service contracts
by way of a Memorandum of Agreement with each of the manpower
cooperatives; complainants continued rendering their services at
the insistence of Maricalum Mining through their cooperatives;
Maricalum Mining never relinquished possession over the Sipalay
Mining Complex; Maricalum Mining continuously availed of the
services of complainants through their respective manpower
cooperatives; in G Holdings, Inc. v. National Mines and Allied
Workers Union Local 103 (NAMAWU), et al. 27 (NAMA WU Case), the
Court already held that G Holdings and Maricalum Mining have
separate and distinct corporate personalities. The dispositive
portion of the NLRC ruling states:
WHEREFORE, premises considered, the Decision rendered by the
Labor Arbiter on 20 April 2011 is hereby MODIFIED, to wit:
26 Rollo (G.R. No. 221813, Vol. I), pp. 284-325. 27 619 Phil.
69, 78 (2009).
/(
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DECISION 10 G.R. Nos. 221813 & 222723
1) the monetary award adjudged to complainants Jessie
Magallanes, Rogelio E. Fulo, Salvador J. Arceo, Freddie Masicampo,
Welilmo Neri, Erlinda Fernandez and Edgar Sobrino are
CANCELLED;
2) the award of ten percent (10%) attorney's fees is ADJUSTED
commensurate to the award of unpaid salaries/wages and 13th month
pay of the remaining complainants;
3) the directive for respondent "G" Holdings, Inc. to pay
complainants the monetary awards adjudged by the Labor Arbiter is
CANCELLED;
4) it is intervenor that is, accordingly, directed to pay the
remaining complainants their respective monetary awards.
In all other respects the Decision ST ANDS.
SO ORDERED.28
Complainants and Maricalum Mining filed their respective motions
for reconsideration before the NLRC. On January 31, 2012, it issued
a resolution modifying its previous decision. The dispositive
portion of the NLRC resolution state:
WHEREFORE, premises considered, intervenor's Motion for
Reconsideration is only PARTIALLY GRANTED. The Decision promulgated
by the Commission on 29 November 2011 modifying the Labor Arbiter's
decision as stated therein, is further MODIFIED to the effect that
the monetary awards adjudged in favor of complainants Wilfredo
Taganile and Bartholomew T. Jamboy are CANCELLED.
SO ORDERED.29
Undaunted, the parties filed their respective petitions for
certiorari before the CA.
The CA Ruling
In its decision dated October 29, 2014, the CA denied the
petitions and affirmed the decision of the NLRC. It ratiocinated
that factual issues are
28 Rollo (G.R. No. 221813, Vol. I), pp. 405-406. 29 Id. at
451.
h
-
DECISION 11 G.R. Nos. 221813 & 222723
not fit subjects for review via the extraordinary remedy of
certiorari. The CA emphasized that the NLRC's factual findings are
conclusive and binding on the appellate courts when they are
supported by substantial evidence. Thus, it maintained that it
cannot review and re-evaluate the evidence all over again because
there was no showing that the NLRC's findings of facts were reached
arbitrarily. The decretal portion of the CA decision states:
WHEREFORE, premises considered, the instant petition for
certiorari is DENIED, and the assailed Decision dated 29 December
2011 and two Resolutions both dated 31 January 2012 of the National
Labor Relations Commission are hereby AFFIRMED in all respects.
Costs against petitioners.
SO ORDERED.30
Hence, these consolidated petitions essentially raising the
following ISsues:
I
WHETHER THE COURT OF APPEALS ERRED IN REFUSING TO RE-EVALUATE
THE FACTS AND IN FINDING NO GRAVE ABUSE OF DISCRETION ON THE PART
OF THE NLRC;
II
WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S
FINDING OF SUBSTANTIAL EVIDENCE IN GRANTING THE COMPLAINANTS'
MONETARY AWARD AS WELL AS ITS REFUSAL TO REMAND THE CASE BACK TO
THE LABOR ARBITER FOR RE-COMPUTATION OF SUCH AW ARD;
III
WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THAT THE NLRC
ALLOWED MARICALUM MINING TO INTERVENE IN THE CASE ONLY ON
APPEAL;
IV
WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S
RULING WHICH ALLOWED THE PIERCING OF THE CORPORA TE VEIL AGAINST
MARI CAL UM MINING BUT NOT AGAINST SIP ALA Y HOSPITAL.
30 Id. at 27.
fr/
-
DECISION 12 G.R. Nos. 221813 & 222723
Complainants argue that the CA committed several reversible
errors because: (a) it refused to re-evaluate the facts of the case
even if the factual findings of the NLRC and the LA were
conflicting; (b) it failed to consider that G Holdings had already
acquired all of Maricalum Mining's assets and that Teodoro G.
Bernardino (Bernardino) was now the president and controlling
stockholder of both corporations; ( c) it failed to take into
account that Maricalum Mining was allowed to intervene only on
appeal even though it was not a real party-in-interest; ( d) it
failed to appreciate the LA' s findings that Maricalum Mining could
not have hired complainants because G Holdings had already acquired
in an auction sale all the assets in the Sipalay Mining Complex; (
e) it failed to consider that all resident managers of the Sipalay
Mining Complex were employed by G Holdings; (f) the foreclosure of
the assets in the Sipalay Mining Complex was intended to bring the
said properties outside the reach of complainants; (g) the Sipalay
Hospital had been existing as a hospital for Maricalum Mining's
employees long before G Holdings arrived; (h) Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Edgar M. Sobrino and Wilfredo C. Taganile,
Sr. were all hired by Maricalum Mining but were dismissed by G
Holdings; (i) Sipalay Hospital existed without a board of directors
and its employees were receiving orders from Maricalum Mining and,
later on, replaced by G Holdings' officer-in-charge; and G)
Maricalum Mining and G Holdings controlled the affairs of Sipalay
Hospital.
Maricalum Mining contends that the CA committed grave abuse of
discretion because the monetary awards were improperly computed. It
claims that complainants had stopped rendering their services since
September 23, 2010, hence, their monetary claims covering the
second half of April 2007 up to July 2007 have already prescribed
as provided pursuant to Article 291 of the Labor Code. Moreover, it
also stressed that the NLRC should have remanded the case to the LA
for the determination of the manpower cooperatives' net surpluses
and how these amounts were distributed to their members to aid the
proper determination of the total amount of the monetary award.
Finally, Maricalum Mining avers that the awards in favor of some of
the complainants are "improbable" and completely unfounded.
On the other hand, G Holdings argues that piercing the corporate
veil of Maricalum Mining is not proper because: (a) it did not
acquire all of Maricalum Mining's assets; (b) it is primarily
engaged in the business of owning and holding shares of stocks of
different companies-not participating in the operations of its
subsidiaries; ( c) Mari cal um Mining, the actual employers of
complainants, had already manifested its willingness to settle the
correct money claims; ( d) Bernardino is not a controlling
stockholder of Maricalum Mining because the latter's corporate
records
;y;'
-
DECISION 13 G.R. Nos. 221813 & 222723
show that almost all of its shares of stock are owned by the
APT; ( e) Joost Pekelharing-not Bernardino-is G Holdings'
president; (f) in the NAMA WU Case, it was already held that
control over Maricalum Mining was exercised by the APT and not G
Holdings; (g) the NLRC did not commit any grave abuse of discretion
when it allowed Maricalum Mining to intervene after the LA's
decision was promulgated; (h) the cash vouchers, payment schedule,
termination letters and caretaker schedules presented by
complainants do not prove the employment relationship with G
Holdings because the signatories thereto were either from Maricalum
Mining or the manpower cooperatives; (i) this Court's
pronouncements in the NAMA WU Case and in Republic v. G Holdings,
Inc. 31 prove that Maricalum Mining never relinquished possession
of the Sipalay Mining Complex in favor of G Holdings; and U) Dr.
Welilmo T. Neri, Erlinda L. Fernandez, Edgar M. Sobrino and
Wilfredo C. Taganile, Sr. were employees of the Sipalay Hospital,
which is a separate business entity, and were not members in any of
the manpower cooperatives, which entered into a labor-only
arrangement with Maricalum Mining.
The Court's Ruling
It is basic that only pure questions of law should be raised in
petitions for review on certiorari under Rule 45 of the Rules of
Court.32 It will not entertain questions of fact as the factual
findings of appellate courts are final, binding or conclusive on
the parties and upon this court when supported by substantial
evidence.33 In labor cases, however, the Court has to examine the
CA' s Decision from the prism of whether the latter had correctly
determined the presence or absence of grave abuse of discretion in
the NLRC's Decision.34
In this case, the principle that this Court is not a trier of
facts applies with greater force in labor cases. 35 Grave abuse
must have attended the evaluation of the facts and evidence
presented by the parties.36 This Court is keenly aware that the CA
undertook a Rule 65 review-not a review on appeal-of the NLRC
decision challenged before it. 37 It follows that this Court will
not re-examine conflicting evidence, reevaluate the credibility of
witnesses, or substitute the findings of fact of the NLRC, an
administrative
31 Supra, note 7. 32 Far Eastern Surety and Insurance Co., Inc.
v. People, 721 Phil. 760, 770(2013), citations omitted. 33
Villarama v. Atty. De Jesus, G.R. No. 217004, April 17, 2017,
citations omitted. 34 Quebral, et al. v. Angbus Construction, Inc.,
et al., G.R. No. 221897, November 7, 2016, citations omitted. 35
Nob/ado, et al. v. Alfonso, 773 Phil. 271, 279 (2015), citations
omitted. 36 Pascual v. Burgos, et al., 776 Phil. 167, 186(2016),
citations omitted. 37 Philippine National Bank v. Gregorio, G.R.
No. 194944, September 18, 2017, citations omitted.
~~
-
DECISION 14 G.R. Nos. 221813 & 222723
body that has expertise in its specialized field. 38 It may only
examine the facts only for the purpose of resolving allegations and
determining the existence of grave abuse of discretion. 39
Accordingly, with these procedural guidelines, the Court will now
proceed to determine whether or not the CA had committed any
reversible error in affirming the NLRC's Decision.
Propriety of the Monetary Awards
Ordinarily, when there is sufficient evidence before the Court
to enable it to resolve fundamental issues, it will dispense with
the regular procedure of remanding the case to the lower court or
appropriate tribunal in order to avoid a further delay in the
resolution of the case.40 A remand is only necessary when the
proceedings below are grossly inadequate to settle factual
issues.41 This is in line with the Court's power to issue a process
in order to enforce its own decrees and thus avoid circuitous
actions and vexatious litigation.42
In the case at bench, Maricalum Mining is seeking to have the
case remanded because the LA allegedly miscomputed the amount of
the monetary awards. However, it failed to offer any reasonable
argument or explanation why the proceedings conducted before the
NLRC or LA were "grossly inadequate to settle factual issues,"
especially as regards the computation of monetary awards. Its bare
allegations - that the monetary awards were improperly computed
because prescribed claims have been granted, that the net surpluses
of the manpower cooperative were not properly distributed, and that
the awards in favor of some of the complainants were improbable -
do not warrant the invocation of this Court's power to have the
case remanded back to the LA. Bare and unsubstantiated allegations
do not constitute substantial evidence and have no probative
value.43
Besides, it is not imperative for the Court to remand the case
to the LA for the determination of the amounts of net surpluses
that each of the manpower cooperatives had received from Maricalum
Mining. The records show that Maricalum Mining was guilty of
entering into a labor-only contracting arrangement with the
manpower cooperatives, thus, all of them
38 Protective Maximum Security Agency, Inc. v. Fuentes, 753
Phil. 482, 504 (2015), citations omitted. 39 United Coconut
Planters Bank v. Looyuko, et al., 560 Phil. 581, 590 (2007),
citations omitted. 40 Simon, et al. v. Canlas, 521 Phil. 558, 575
(2006), citations omitted. 41 Tacloban II Neighborhood Association,
Inc. v. Office of the President, et al., 588 Phil. 177, 195 (2008),
citations omitted. 42 Cf De Ortega v. Natividad, etc., et al., 71
Phil. 340, 342 ( 1941 ), citations omitted. 43 LNS International
Manpower Services v. Padua, Jr., 628 Phil. 223, 224 (2010).
~
-
DECISION 15 G.R. Nos. 221813 & 222723
are solidarily liable to the complainants by virtue of Article
10644 of the Labor Code. In DOLE Philippines, Inc. v. Esteva, et
al. 45 it was ruled that a cooperative, despite having a
personality separate from its members, 46 is engaged in a
labor-only contracting arrangement based on the following
indicators:
1) The cooperative had a measly paid-up capital of P6,600.00 and
had only managed to increase the same by continually engaging in
labor-only contracting with its client;
2) The cooperative did not carry out an independent business
from its client and its own office and equipment were mainly used
for administrative purposes;
3) The cooperative's members had to undergo instructions and
pass the training provided by the client's personnel before they
could start working alongside regular employees;
4) The cooperative was not engaged to perform a specific and
special job or service; and
5) The cooperative's members performed activities directly
related and vital to the principal business of its client.
Here, the virtually identical sets of memorandum of agreement
with the manpower cooperatives state among others that: (a) the
services covered shall consist of operating loading, drilling and
various auxiliary equipments; and (b) the cooperative members shall
abide by the norms and standards of the Maricalum Mining. These
services and guidelines are essential to the operations of
Maricalum Mining. Thus, since the cooperative members perform the
work vital to the operation of the Sipalay Mining Complex, the they
were being contracted in a labor-only arrangement. Moreover, the
burden of proving the supposed status of the contractor rests on
the
44 Article I 06. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor
and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him.
xx xx
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner
and extent as ifthe latter were directly employed by him. (emphasis
supplied) 45 538 Phil. 817, 867-869 (2006). 46 See Republic v.
Asiapro Cooperative, 563 Phil. 979, I 002 (2007).
~/
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DECISION 16 G.R. Nos. 221813 & 222723
principal47 and Maricalum Mining, being the principal, also
failed to present any evidence before the NLRC that each of the
manpower cooperatives had an independent viable business.
Propriety of Marica/um Mining's Intervention
Intervention is a remedy by which a third party, who is not
originally imp leaded in a proceeding, becomes a litigant for
purposes of protecting his or her right or interest that may be
affected by the proceedings.48 The factors that should be reckoned
in determining whether or not to allow intervention are whether
intervention will unduly delay or prejudice the adjudication of the
rights of the original parties and whether the intervenors rights
may be fully protected in a separate proceeding. 49 A motion to
intervene may be entertained or allowed even if filed after
judgment was rendered by the trial court, especially in cases where
the intervenors are indispensable parties.50 Parties may be added
by order of the court on motion of the party or on its own
initiative at any stage of the action and/or at such times as are
just. s 1
In this case, it was never contested by complainants that it was
Maricalum Mining-not G Holdings-who executed several sets of
memorandum of agreement with the manpower cooperatives. The
contractual connection between Maricalum Mining and the manpower
cooperatives is crucial to the determination of labor-related
liabilities especially when it involves a labor-only contracting
arrangement. Accordingly, Maricalum Mining will eventually be held
solidarily liable with the manpower cooperatives. In other words,
it stands to be injured by the incontrovertible fact that it
entered into a labor-only arrangement with the manpower
cooperatives. Thus, Maricalum Mining is an indispensable party and
worthy of being allowed to intervene in this case.52
In order to properly analyze G Holdings's role in the instant
dispute, the Court must discuss its peculiar relationship (or lack
thereof) with Maricalum Mining and Sipalay Hospital.
47 Petron Corporation v. Caberte, et al., 759 Phil. 353, 367
(2015), citations omitted. 48 Neptune Metal Scrap Recycling, Inc.
v. Manila Electric Company, et al., 789 Phil. 30, 3 7 (2016),
citations omitted. 49 Salandanan v. Spouses Mendez, 600 Phil. 229,
241. 50 Galicia, et al. v. Manliquez vda. de Mindo, et al., 549
Phil. 595, 605 (2007), citations omitted. 51 Plasabas, et al. v.
Court of Appeals, et al., 60 I Phil. 669, 675-676 (2009). 51 Cf In
the Matter of the Heirship (Intestate Estates) of"the late
Hermogenes Rodriguez, et al. v. Roh/es, 653 Phil. 396, 404-405 (20
I 0), citations omitted.
¥
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DECISION
G Holdings and Marica/um Mining
17 G.R. Nos. 221813 & 222723
The doctrine of piercing the corporate veil applies only in
three (3) basic areas, namely: (a) defeat of public convenience as
when the corporate fiction is used as a vehicle for the evasion of
an existing obligation; (b) fraud cases or when the corporate
entity is used to justify a wrong, protect fraud, or defend a
crime; or ( c) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. 53 This
principle is basically applied only to determine established
liability. 54 However, piercing of the veil of corporate fiction is
frowned upon and must be done with caution. 55 This is because a
corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from
that of any other legal entity to which it may be related. 56
A parent57 or holding company58 is a corporation which owns or
is organized to own a substantial portion of another company's
voting59 shares of stock enough to control60 or influence the
latter's management, policies or affairs thru election of the
latter's board of directors or otherwise. However, the term
"holding company" is customarily used interchangeably with the term
"investment company" which, in tum, is defined by Section 4 (a) of
Republic Act (R.A.) No. 262961 as "any issuer (corporation) which
is or holds itself out as being engaged primarily, or proposes to
engage primarily, in the business of investing, reinvesting, or
trading in securities."
In other words, a "holding company" is organized and is
basically conducting its business by investing substantially in the
equity securities62 of another company for the purposes of
controlling their policies (as opposed to directly engaging in
operating activities) and "holding" them in a conglomerate or
umbrella structure along with other subsidiaries. Significantly,
the holding company itself-being a separate entity-does not
53 General Credit Corporation v. A/sons Development and
Investment Corporation, et al., 542 Phil. 219, 232 (2007),
citations omitted. 54 Kukan International Corporation v. Reyes, et
al., 646 Phil. 210, 234 (2010), citations omitted. 55 Reynoso, IVv.
Court of Appeals, et al., 399 Phil. 38, 50 (2000). 56 Ever
Electrical Manufacturing, Inc., et al. v. Samahang Manggagawa ng
Ever Electrical, et al., 687 Phil. 529, 538 (2012). 57 See Section
3 (x) of Republic Act No. 9856 (The Real Estate Investment Trust
Act of2009). 58 See Section 3 (g) of Republic Act No. 2629
(Investment Company Act). 59 See Section 3 (ff) of Republic Act No.
2629 (Investment Company Act). 60 See Section 3 (h) of Republic Act
No. 2629 (Investment Company Act); supra note 58. 61 The Investment
Company Act (June 18, 1960). 62 Equity securities represent
ownership in a company (Stice, et al., Intermediate Accounting, l
71h Ed. [20 IO], p. 839).
¥
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DECISION 18 G.R. Nos. 221813 & 222723
own the assets of and does not answer for the liabilities of the
subsidiary63 or affiliate. 64 The management of the subsidiary or
affiliate still rests in the hands of its own board of directors
and corporate officers. It is in keeping with the basic rule a
corporation is a juridical entity which is vested with a legal
personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it.65 The
corporate form was created to allow shareholders to invest without
incurring personal liability for the acts of the corporation.
66
While the veil of corporate fiction may be pierced under certain
instances, mere ownership of a subsidiary does not justify the
imposition of liability on the parent company. 67 It must further
appear that to recognize a parent and a subsidiary as separate
entities would aid in the consummation of a wrong.68 Thus, a
holding corporation has a separate corporate existence and is to be
treated as a separate entity; unless the facts show that such
separate corporate existence is a mere sham, or has been used as an
instrument for concealing the truth.69
In the case at bench, complainants mainly harp their cause on
the alter ego theory. Under this theory, piercing the veil of
corporate fiction may be allowed only if the following elements
concur:
1) Control-not mere stock control, but complete domination-not
only of finances, but of policy and business practice in respect to
the transaction attacked, must have been such that the corporate
entity as to this transaction had at the time no separate mind,
will or existence of its own;
2) Such control must have been used by the defendant to commit a
fraud or a wrong, to perpetuate the violation of a statutory or
other positive legal duty, or a dishonest and an unjust act in
contravention of plaintiffs legal right; and
3) The said control and breach of duty must have proximately
caused the injury or unjust loss complained of.7°
63 Section 3 (kk) of Republic Act No. 9856 (The Real Estate
Investment Trust Act of 2009). 64 See Section 3 (b) of Republic Act
No. 9856 (The Real Estate Investment Trust Act of2009); cf Section
3 (c) of Republic Act No. 2629 (Investment Company Act). 65 Aratea,
et al. v. Suico, et al., 547 Phil. 407, 415 (2007), citations
omitted. 66 Pearson, et al. v. Component Technology Corporation, et
al., 247 F.3d 471 (2001), citations omitted. 67 Parkinson, et al.
v. Guidant Corporation, et al., 315 F.Supp.2d 741 (2004), citations
omitted. 68 Cf Pacific Rehouse Corporation v. Court of Appeals, et
al., 730 Phil. 325, 351 (2014), citations omitted. 69 18 C.J .S.
Corporations § 5 ( 1939). 70 Philippine National Bank, et al. v.
Andrada Electric & Engineering Company, 430 Phil. 882, 895
(2002), citations omitted.
/J~
-
DECISION 19 G.R. Nos. 221813 & 222723
The elements of the alter ego theory were discussed in
Philippine National Bank v. Hydro Resources Contractors
Corporation, 71 to wit:
The first prong is the "instrumentality" or "control" test. This
test requires that the subsidiary be completely under the control
and domination of the parent. It examines the parent corporation's
relationship with the subsidiary. It inquires whether a subsidiary
corporation is so organized and controlled and its affairs are so
conducted as to make it a mere instrumentality or agent of the
parent corporation such that its separate existence as a distinct
corporate entity will be ignored. It seeks to establish whether the
subsidiary corporation has no autonomy and the parent corporation,
though acting through the subsidiary in form and appearance, "is
operating the business directly for itself."
The second prong is the "fraud" test. This test requires that
the parent corporation's conduct in using the subsidiary
corporation be unjust, fraudulent or wrongful. It examines the
relationship of the plaintiff to the corporation. It recognizes
that piercing is appropriate only if the parent corporation uses
the subsidiary in a way that harms the plaintiff creditor. As such,
it requires a showing of "an element of injustice or fundamental
unfairness."
The third prong is the "harm" test. This test requires the
plaintiff to show that the defendant's control, exerted in a
fraudulent, illegal or otherwise unfair manner toward it, caused
the harm suffered. A causal connection between the fraudulent
conduct committed through the instrumentality of the subsidiary and
the injury suffered or the damage incurred by the plaintiff should
be established. The plaintiff must prove that, unless the corporate
veil is pierced, it will have been treated unjustly by the
defendant's exercise of control and improper use of the corporate
form and, thereby, suffer damages.
To summarize, piercing the corporate veil based on the alter ego
theory requires the concurrence of three elements: control of the
corporation by the stockholder or parent corporation, fraud or
fundamental unfairness imposed on the plaintiff, and harm or damage
caused to the plaintiff by the fraudulent or unfair act of the
corporation. The absence of any of these elements prevents piercing
the corporate veil. (emphases and underscoring supplied)
Again, all these three elements must concur before the corporate
veil may be pierced under the alter ego theory. Keeping in mind the
parameters, guidelines and indicators for proper piercing of the
corporate veil, the Court now proceeds to determine whether
Maricalum Mining's corporate veil may be pierced in order to allow
complainants to enforce their monetary awards against G
Holdings.
71 706 Phil. 297, 310-312 (2013), citations omitted.
¥
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DECISION
I. Control or Instrumentality Test
20 G.R. Nos. 221813 & 222723
In Concept Builders, Inc. v. National Labor Relations
Commission, et al., 72 the Court first laid down the first set of
probative factors of identity that will justify the application of
the doctrine of piercing the corporate veil, vzz:
1) Stock ownership by one or common ownership of both
corporations.
2) Identity of directors and officers.
3) The manner of keeping corporate books and records.
4) Methods of conducting the business.
Later, in Philippine National Bank v. Ritratto Group Inc., et
al.,73 the Court expanded the aforementioned probative factors and
enumerated a combination of any of the following common
circumstances that may also render a subsidiary an instrumentality,
to wit:
I) The parent corporation owns all or most of the capital stock
of the subsidiary;
2) The parent and subsidiary corporations have common directors
or officers;
3) The parent corporation finances the subsidiary;
4) The parent corporation subscribes to all the capital stock of
the subsidiary or otherwise causes its incorporation;
5) The subsidiary has grossly inadequate capital;
6) The parent corporation pays the salaries and other expenses
or losses of the subsidiary;
7) The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by the
parent corporation;
8) In the papers of the parent corporation or in the statements
of its officers, the subsidiary is described as a department or
division of the parent corporation, or its business or financial
responsibility is referred to as the parent corporation's own;
72 326 Phil. 955, 965 (1996), citations omitted. D 414 Phil.
494, 504-505 (2001).
¥
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DECISION 21 G.R. Nos. 221813 & 222723
9) The parent corporation uses the property of the subsidiary as
its own;
10) The directors or executives of the subsidiary do not act
independently in the interest of the subsidiary but take their
orders from the parent corporation; and
11) The formal legal requirements of the subsidiary are not
observed.
In the instant case, there is no doubt that G Holdings-being the
majority and controlling stockholder-had been exercising
significant control over Maricalum Mining. This is because this
Court had already upheld the validity and enforceability of the PSA
between the APT and G Holdings. It was stipulated in the PSA that
APT shall transfer 90% of Mari cal um Mining's equity securities to
G Holdings and it establishes the presence of absolute control of a
subsidiary's corporate affairs. Moreover, the Court evinces its
observation that Maricalum Mining's corporate name appearing on the
heading of the cash vouchers issued in payment of the services
rendered by the manpower cooperatives is being superimposed with G
Holding's corporate name. Due to this observation, it can be
reasonably inferred that G Holdings is paying for Mari cal um
Mining's salary expenses. Hence, the presence of both circumstances
of dominant equity ownership and provision for salary expenses may
adequately establish that Maricalum Mining is an instrumentality of
G Holdings.
However, mere presence of control and full ownership of a parent
over a subsidiary is not enough to pierce the veil of corporate
fiction. It has been reiterated by this Court time and again that
mere ownership by a single stockholder or by another corporation of
all or nearly all of the capital stock of a corporation is not of
itself sufficient ground for disregarding the separate corporate
personality.74
II. Fraud Test
The corporate veil may be lifted only if it has been used to
shield fraud, defend crime, justify a wrong, defeat public
convenience, insulate bad faith or perpetuate injustice.75 To aid
in the determination of the presence or
74 Zambrano, et al. v. Philippine Carpet Manufacturing
Corporation, et al., G.R. No. 224099, June 21, 2017, citations
omitted; Francisco, et al. v. Mejia, et al., 415 Phil. 153, 170
(2001). 75 See San Juan Structural and Steel Fabricators, Inc. v.
Court of Appeals, et al., 357 Phil. 631, 648-649 ( 1998).
fr~
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DECISION 22 G.R. Nos. 221813 & 222723
absence of fraud, the following factors in the "Totality of
Circumstances Test"76 may be considered, viz:
1) Commingling of funds and other assets of the corporation with
those of the individual shareholders;
2) Diversion of the corporation's funds or assets to
non-corporate uses (to the personal uses of the corporation's
shareholders);
3) Failure to maintain the corporate formalities necessary for
the issuance of or subscription to the corporation's stock, such as
formal approval of the stock issue by the board of directors;
4) An individual shareholder representing to persons outside the
corporation that he or she is personally liable for the debts or
other obligations of the corporation;
5) Failure to maintain corporate minutes or adequate corporate
records;
6) Identical equitable ownership in two entities;
7) Identity of the directors and officers of two entities who
are responsible for supervision and management (a partnership or
sole proprietorship and a corporation owned and managed by the same
parties);
8) Failure to adequately capitalize a corporation for the
reasonable risks of the corporate undertaking;
9) Absence of separately held corporate assets;
10) Use of a corporation as a mere shell or conduit to operate a
single venture or some particular aspect of the business of an
individual or another corporation;
11) Sole ownership of all the stock by one individual or members
of a single family;
12) Use of the same office or business location by the
corporation and its individual shareholder(s);
13) Employment of the same employees or attorney by the
corporation and its shareholder(s);
14) Concealment or misrepresentation of the identity of the
ownership, management or financial interests in the corporation,
and concealment of personal business activities of the
shareholders
76 laya v. Erin Homes, Inc., et al., 352 S.E.2d 93 (1986), cited
in: Kinney Shoe Corporation v. Polan, 939 F.2d 209 (1991).
/
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DECISION 23 G.R. Nos. 221813 & 222723
(sole shareholders do not reveal the association with a
corporation, which makes loans to them without adequate
security);
15) Disregard of legal formalities and failure to maintain
proper arm's length relationships among related entities;
16) Use of a corporate entity as a conduit to procure labor,
services or merchandise for another person or entity;
17) Diversion of corporate assets from the corporation by or to
a stockholder or other person or entity to the detriment of
creditors, or the manipulation of assets and liabilities between
entities to concentrate the assets in one and the liabilities in
another;
18) Contracting by the corporation with another person with the
intent to avoid the risk of nonperformance by use of the corporate
entity; or the use of a corporation as a subterfuge for illegal
transactions; and
19) The formation and use of the corporation to assume the
existing liabilities of another person or entity.
Aside from the aforementioned circumstances, it must be
determined whether the transfer of assets from Maricalum Mining to
G Holdings is enough to invoke the equitable remedy of piercing the
corporate veil. The same issue was resolved in Y-1 Leisure Phils.,
Inc., et al. v. Yu77 where this Court applied the "Nell Doctrine"78
regarding the transfer of all the assets of one corporation to
another. It was discussed in that case that as a general rule that
where one corporation sells or otherwise transfers all of its
assets to another corporation, the latter is not liable for the
debts and liabilities of the transferor, except:
1) Where the purchaser expressly or impliedly agrees to assume
such debts;
2) Where the transaction amounts to a consolidation or merger of
the corporations;
3) Where the purchasing corporation is merely a continuation of
the selling corporation; and
4) Where the transaction is entered into fraudulently in order
to escape liability for such debts.
77 769 Phil. 279, 293 (2015). 78 The Edward J. Nell Company v.
Pacific Farms, Inc., 122 Phil. 825, 827 (1965), citations
omitted.
//
-
DECISION 24 G.R. Nos. 221813 & 222723
If any of the above-cited exceptions are present, then the
transferee corporation shall assume the liabilities of the
transferor. 79
In this case, G Holdings cannot be held liable for the
satisfaction of labor-related claims against Maricalum Mining under
the fraud test for the following reasons:
First, the transfer of some Maricalum Mining's assets in favor G
Holdings was by virtue of the PSA as part of an official measure to
dispose of the government's non-performing assets-not to evade its
monetary obligations to the complainants. Even before complainants'
monetary claims supposedly existed in 2007, some of Maricalum
Mining's assets had already been validly extrajudicially foreclosed
and eventually sold to G Holdings in 2001. Thus, G Holdings could
not have devised a scheme to avoid a non-existent obligation. No
fraud could be attributed to G Holdings because the transfer of
assets was pursuant to a previously perfected valid contract.
Settled is the rule that where one corporation sells or
otherwise transfers all its assets to another corporation for
value, the latter is not, by that fact alone, liable for the debts
and liabilities of the transferor. 80 In other words, control or
ownership of substantially all of a subsidiary's assets is not by
itself an indication of a holding company's fraudulent intent to
alienate these assets in evading labor-related claims or
liabilities. As discussed earlier, the PSA was not designed to
evade the monetary claims of the complainants. Although there was
proof that G Holdings has an office in Maricalum Mining's premises
and that that some of their assets have been commingled due to the
PSA' s unavoidable consequences, there was no fraudulent diversion
of corporate assets to another corporation for the sole purpose of
evading complainants' claim.
Besides, it is evident that the alleged continuing depletion of
Maricalum Mining's assets is due to its disgruntled employees' own
acts of pilferage, which was beyond the control of G Holdings. More
so, complainants also failed to present any clear and convincing
evidence that G Holdings was grossly negligent and failed to
exercise the required degree of diligence in ensuring that
Maricalum Mining's assets would be protected from pilferage. 81
Hence, no fraud can be imputed against G Holdings
79 Supra note 77 at 293. 80 Pantranco Employees Association, et
al. v. National labor Relations Commission, et al., 600 Phil. 645,
660 (2009). 81 See Heirs of Fe Tan Uy v. International Exchange
Bank, 703 Phil. 477, 486 (2013 ).
,fat!
-
DECISION 25 G.R. Nos. 221813 & 222723
considering that there is no evidence in the records that
establishes it systematically tried to alienate Maricalum Mining's
assets to escape the liabilities to complainants.
Second, it was not proven that all of Maricalum Mining's assets
were transferred to G Holdings or were totally depleted.
Complainants never offered any evidence to establish that Maricalum
Mining had absolutely no substantial assets to cover for their
monetary claims. Their allegation that their claims will be reduced
to a mere "paper victory" has not confirmed with concrete proof. At
the very least, substantial evidence should be adduced that the
subsidiary company's "net realizable value"82 of "current assets"
83 and "fair value" 84 of "non-current assets" 85 are collectively
insufficient to cover the whole amount of its liability subject in
the instant litigation.
Third, G Holdings purchased Mari cal um Mining's shares from the
APT not for the purpose of continuing the latter's existence and
operations but for the purpose of investing in the mining industry
without having to directly engage in the management and operation
of mining. As discussed earlier, a holding company's primary
business is merely to invest in the equity of another corporation
for the purpose of earning from the latter's endeavors. It
generally does not undertake to engage in the daily operating
activities of its subsidiaries that, in tum, have their own
separate sets of directors and officers. Thus, there should be
proof that a holding company had indeed fraudulently used the
separate corporate personality of its subsidiary to evade an
obligation before it can be held liable. Since G Holdings is a
holding company, the corporate veil of its subsidiaries may only be
pierced based on fraud or gross negligence amounting to bad
faith.
Lastly, no clear and convincing evidence was presented by the
complainants to conclusively prove the presence of fraud on the
part of G Holdings. Although the quantum of evidence needed to
establish a claim for
82 Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale (International
Financial Reporting Standards No. 2.6). 83 Current assets are
assets that a company expects to convert to cash or use up within
one year or its operating cycle, whichever is longer (Weygandt, et
al., Accounting Principles, I01h Ed. [2012], p. 172). 84 Fair value
is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction in the principal (or
most advantageous) market at the measurement date under current
market conditions (ie an exit price) regardless of whether that
price is directly observable or estimated using another valuation
technique (International Financial Reporting Standards No. 19.24).
85 Non-current assets are those which are not likely to be
converted into unrestricted cash within a year of the balance sheet
date (see:
https://www.accountingcoach.com/blog/what-is-a-noncurrent-asset
[last visited: May 28, 2018]).
;/
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DECISION 26 G.R. Nos. 221813 & 222723
illegal dismissal in labor cases is substantial evidence,s6 the
quantum need to establish the presence of fraud is clear and
convincing evidence.s7 Thus, to disregard the separate juridical
personality of a corporation, the wrongdoing must be established
clearly and convincingly-it cannot be presumed.ss
Here, the complainants did not satisfy the requisite quantum of
evidence to prove fraud on the part of G Holdings. They merely
offered allegations and suppositions that, since Maricalum Mining's
assets appear to be continuously depleting and that the same
corporation is a subsidiary, G Holdings could have been guilty of
fraud. As emphasized earlier, bare allegations do not prove
anything. There must be proof that fraud-not the inevitable effects
of a previously executed and valid contract such as the PSA-was the
cause of the latter's total asset depletion. To be clear, the
presence of control per se is not enough to justify the piercing of
the corporate veil.
III. Harm or Casual Connection Test
In WPM International Trading, Inc., et al. v. Labayen, s9 the
Court laid down the criteria for the harm or casual connection
test, to wit:
In this connection, we stress that the control necessary to
invoke the instrumentality or alter ego rule is not majority or
even complete stock control but such domination of finances,
policies and practices that the controlled corporation has, so to
speak, no separate mind, will or existence of its own, and is but a
conduit for its principal. The control must be shown to have been
exercised at the time the acts complained of took place. Moreover,
the control and breach of duty must proximatelv cause the injury or
unjust loss for which the complaint is made. (emphases and
underscoring supplied)
Proximate cause is defined as that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause,
produces the injury, and without which the result would not have
occurred.90 More comprehensively, the proximate legal cause is that
"acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal connection
with its immediate predecessor, the final
86 Functional, Inc. v. Granjil, 676 Phil. 279, 2S7 (2011 ). 87
Republic v. Guerrero, 520 Phil. 296, 311 (2006). 88 Mcleod v.
National labor Relations Commission, et al., 541 Phil. 214, 239
(2007). 89 743 Phil. 192, 201-202 (2014). 90 Mendoza, et al. v.
Spouses Gomez, 736 Phil. 460, 475 (2014).
~
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DECISION 27 G.R. Nos. 221813 & 222723
event in the chain immediately effecting the injury as a natural
and probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result
therefrom."91
Hence, for an act or event to be considered as proximate legal
cause, it should be shown that such act or event had indeed caused
injury to another.
In the case at bench, complainants have not yet even suffered
any monetary injury. They have yet to enforce their claims against
Maricalum Mining. It is apparent that complainants are merely
anxious that their monetary awards will not be satisfied because
the assets of Maricalum Mining were allegedly transferred
surreptitiously to G Holdings. However, as discussed earlier, since
complainants failed to show that G Holdings' s mere exercise of
control had a clear hand in the depletion of Maricalum Mining's
assets, no proximate cause was successfully established. The
transfer of assets was pursuant to a valid and legal PSA between G
Holdings and APT.
Accordingly, complainants failed to satisfy the second and third
tests to justify the application of the alter ego theory. This
inevitably shows that the CA committed no reversible error in
upholding the NLRC's Decision declaring Maricalum Mining as the
proper party liable to pay the monetary awards in favor of
complainants.
G Holdings and Sipalay Hospital
Sipalay Hospital was incorporated by Romulo G. Zafra, Eleanore
B. Gutierrez, Helen Grace B. Fernandez, Evelyn B. Badajos and Helen
Grace L. Arbolario. 92 However, there is absence of indication that
G Holdings subsequently acquired the controlling interests of
Sipalay Hospital. There is also no evidence that G Holdings entered
into a contract with Sipalay Hospital to provide medical services
for its officers and employees. This lack of stockholding or
contractual connection signifies that Sipalay Hospital is not
affiliated93 with G Holdings. Thus, due to this absence of
affiliation,
91 Ramos v. C.O.l. Realty Corporation, 614 Phil. 169, 177
(2009). 92 Rollo (G.R. No. 222723), p. 441. 93 See Section 3 (c) of
Republic Act No. 2629 (Investment Company Act).
(c) "Affiliated person" of another person means (I) any person
directly or indirectly owning. controlling or holding with power to
vote, ten per centum or more of the outstanding voting securities
of such other person; (2) any 'person ten per centum or more of
whose outstanding voting securities are directly or indirectly
owned. controlled. or held with power to vote, by such other
person; (3) any person directly or indi"otly oontmlling, oontmllod
by, oc undoc oommon oontml with, '"'h othoc P'"on; ~"·
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DECISION 28 G.R. Nos. 221813 & 222723
the Court must apply the tests used to determine the existence
of an employee-employer relationship; rather than piercing the
corporate veil.
Under the four-fold test, the employer-employee relationship is
determined if the following are present: a) the selection and
engagement of the employee; b) the payment of wages; c) the power
of dismissal; and d) the power to control the employee's conduct,
or the so-called "control test."94
Here, the "control test" is the most important and crucial among
the four tests. 95 However, in cases where there is no written
agreement to base the relationship on and where the various tasks
performed by the worker bring complexity to the relationship with
the employer, the better approach would therefore be to adopt a
two-tiered test involving: a) the putative employer's power to
control the employee with respect to the means and methods by which
the work is to be accomplished; and b) the underlying economic
realities of the activity or relationship.96
In applying the second tier, the determination of the
relationship between employer and employee depends upon the
circumstances of the whole economic activity (economic reality or
multi-factor test), such as: a) the extent to which the services
performed are an integral part of the employer's business; b) the
extent of the worker's investment in equipment and facilities; c)
the nature and degree of control exercised by the employer; d) the
worker's opportunity for profit and loss; e) the amount of
initiative, skill, judgment or foresight required for the success
of the claimed independent enterprise; f) the permanency and
duration of the relationship between the worker and the employer;
and g) the degree of dependency of the worker upon the employer for
his continued employment in that line of business. 97 Under all of
these tests, the burden to prove by substantial evidence all of the
elements or factors is incumbent on the employee for he or she is
the one claiming the existence of an employment relationship.98
In light of the present circumstances, the Court must apply the
four-fold test for lack of relevant data in the case records
relating to the underlying economic realities of the activity or
relationship of Sipalay Hospital's employees.
director, partner, copartner, or employee of such other person;
and (5) if such other person is an investment company, any
investment adviser thereof or any member of an advisory board
thereof. (emphasis supplied) 94 South East International Rattan,
Inc., et al. v. Coming, 729 Phil. 298, 306 (2014). 95 Alba v.
Espinosa, et al., G.R. No. 227734, August 9, 2017, citations
omitted. 96 Valeroso, et al. v. Skycable Corporation, 790 Phil. 93,
103 (2016). 97 Francisco v. National labor Relations Commission, et
al., 532 Phil. 399, 408-409 (2006). 98 See Valencia v. Classique
Vinyl Products Corporation, et al., G.R. No. 206390, January 30,
2017, 816 SCRA 144, 156, citations omitted.
A/
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DECISION 29 G.R. Nos. 221813 & 222723
To prove the existence of their employment relationship with G
Holdings, complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez,
Edgar M. Sobrino and Wilfredo C. Taganile, Sr. presented the
following documents:
1) Affidavit99 of Dr. Welilmo T. Neri attesting among others
that he was the Medical Director of Sipalay Hospital which is
allegedly owned and operated by G Holdings/Maricalum Mining;
2) Several cash vouchers 100 issued by G Holdings!Maricalum
Mining representing Dr. Welilmo T. Neri's payment for services
rendered to "various" personnel;
3) Schedules of social security premium payments 101 in favor of
Dr. Welilmo T. Neri, Edgar M. Sobrino and Wilfredo C. Taganile, Sr.
stamped paid by G Holdings;
4) Notice of termination102 dated July 3, 2010 issued by Rolando
G. Degojas (OIC of G-Holdings Inc.) issued to Dr. Welilmo T. Neri
and some of his companions who are not complainants in this
case;
5) Notice of termination103 addressed to Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Edgar M. Sobrino and some of their
co-employees who are not complainants in this case with a
collatilla stating that the services of Dr. Welilmo T. Neri and
nurse Erlinda L. Fernandez will be engaged on per call basis;
and
6) A "Statement of Unpaid Salaries of Employees of G Holdings,
Inc. Assigned to the Sipalay General Hospital" 104 prepared by Dr.
Welilmo T. Neri which included his own along with complainants
Erlinda L. Fernandez, Wilfredo C. Taganile, [Sr.] and Edgar M.
[Sobrino].
A perusal of the aforementioned documents fails to show that the
services of complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez,
Edgar M. Sobrino and Wilfredo C. Taganile, Sr. were indeed selected
and engaged by either Maricalum Mining or G Holdings. This gap in
evidence clearly shows that the first factor of the four-fold test,
or the selection and engagement of the employee, was not satisfied
and not supported by substantial evidence.
99 Rollo (G.R. No. 222723), p. 153. 100 Id. at 154-165. 101 Id.
at 166-167. 102 Id. at 168. 103 Id. at 169. 104 Id. at 170.
M
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DECISION 30 G.R. Nos. 221813 & 222723
However, the same cannot be said as to the second and third
factors of the four-fold test (the payment of wages and the power
of dismissal). Since substantial evidence is defined as that amount
of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion, 105 the cash vouchers, social
security payments and notices of termination are reasonable enough
to draw an inference that G Holdings and Maricalum Mining may have
had a hand in the complainants' payment of salaries and
dismissal.
Notwithstanding the absence of the first factor and the presence
of the second and third factors of the four-fold test, the Court
still deems it best to examine the fourth factor-the presence of
control-in order to determine the employment connection of
complainants Dr. Welilmo T. Neri, Erlinda L. Fernandez, Edgar M.
Sobrino and Wilfredo C. Taganile, Sr. with G Holdings.
Under the control test, an employer-employee relationship exists
where the person for whom the services are perfonned reserves the
right to control not only the end achieved, but also the manner and
means to be used in reaching that end. 106 As applied in the
healthcare industry, an employment relationship exists between a
physician and a hospital if the hospital controls both the means
and the details of the process by which the physician is to
accomplish his task. 107 But where a person who works for another
performs his job more or less at his own pleasure, in the manner he
sees fit, not subject to definite hours or conditions of work, and
is compensated according to the result of his efforts and not the
amount thereof, no employer-employee relationship exists. 108
A corporation may only exercise its powers within the
definitions provided by law and its articles of incorporation. 109
Accordingly, in order to determine the presence or absence of an
employment relationship between G Holdings and the employees of
Sipalay Hospital by using the control test, the Court deems it
essential to examine the salient portion of Sipalay Hospital's
Articles of Incorporation imparting its 'primary purpose,' 110 to
wit:
105 Skippers United Pacific, Inc. v. National Labor Relations
Commission, et al., 527 Phil. 248, 257 (2006). 106 Atok Big Wedge
Company, Inc. v. Gison, 670 Phil. 615, 627 (2011). 107 Calamba
Medical Center, Inc. v. National Labor Relations Commission, et
al., 592 Phil. 318, 326 (2008). 108 Orozco v. Court of Appeals, et
al., 584 Phil. 35, 52 (2008). 109 See University of Mindanao, Inc.
v. Bangko Sentral ng Pilipinas, et al., 776 Phil. 40 I, 428 (2016).
110 Rollo (G.R. No. 222723), p. 438.
#
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DECISION 31 G.R. Nos. 221813 & 222723
To own, manage, lease or operate hospitals or clinics offering
and providing medical services and facilities to the general
public, provided that purely professional, medical or surgical
services shall be performed by duly qualified physicians or
surgeons who may or may not be connected with the corporation and
who shall be freely and individually contracted by patients.
(emphasis supplied)
It is immediately apparent that Sipalay Hospital, even if its
facilities are located inside the Sipalay Mining Complex, does not
limit its medical services only to the employees and officers of
Maricalum Mining and/or G Holdings. Its act of holding out services
to the public reinforces the fact of its independence from either
Maricalum Mining or G Holdings because it is free to deal with any
client without any legal or contractual restriction. Moreover, G
Holdings is a holding company primarily engaged in investing
substantially in the stocks of another company-not in directing and
managing the latter's daily business operations. Because of this
corporate attribute, the Court can reasonably draw an inference
that G Holdings does not have a considerable ability to control
means and methods of work of Sipalay Hospital employees. Markedly,
the records are simply bereft of any evidence that G Holdings had,
in fact, used its ownership to control the daily operations of
Sipalay Hospital as well as the working methods of the latter's
employees. There is no evidence showing any subsequent transfer of
shares from the original incorporators of Sipalay Hospital to G
Holdings. Worse, it appears that complainants Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M.
Sobrino are trying to derive their employment connection with G
Holdings merely on an assumed premise that the latter owns the
controlling stocks of Mari cal um Mining.
On this score, the CA committed no reversible error in allowing
the NLRC to delete the monetary awards of Dr. Welilmo T. Neri,
Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M.
Sobrino imposed by the Labor Arbiter against G Holdings.
Conclusion
A holding company may be held liable for the acts of its
subsidiary only when it is adequately proven that: a) there was
control over the subsidiary; (b) such control was used to protect a
fraud (or gross negligence amounting to bad faith) or evade an
obligation; and c) fraud was the proximate cause of another's
existing injury. Further, an employee is duly-burdened to prove the
crucial test or factor of control thru substantial
?'/
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DECISION 32 G.R. Nos. 221813 & 222723
evidence in order to establish the existence of an employment
relationship-especially as against an unaffiliated corporation
alleged to be exercising control.
In this case, complainants have not successfully proven that G
Holdings fraudulently exercised its control over Maricalum Mining
to fraudulently evade any obligation. They also fell short of
proving that G Holdings had exercised operational control over the
employees of Sipalay Hospital. Due to these findings, the Court
sees no reversible error on the part of the CA, which found no
grave abuse of discretion and affirmed in toto the factual findings
and legal conclusions of the NLRC.
WHEREFORE, the Court AFFIRMS in toto the October 29, 2014
Decision of the Court of Appeals in CA-G.R. SP No. 06835.
No pronouncement as to costs.
SO ORDERED.
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DECISION
WE CONCUR:
33
PRESBITE~O J. VELASCO, JR. sociate Justice Chairperson
G.R. Nos. 221813 & 222723
-
DECISION 34
CERTIFICATION
G.R. Nos. 221813 & 222723
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions
in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's
Division.
L '.' I' t Tltit«l Di. 1~,i11;,
"1Lh ,_:u :·,~
C}.z:_T(_ . ' ANTONIO T. C
1
A;;%..L....J Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as
amended)
¥